# The Looming Stagflationary Debt Crisis

1 Opinion June 30, 2021 Project Syndicate ![Nouriel Roubini](/sites/default/files/styles/246w/public/assets/images/nroubini.jpg?itok=R6F5VNmo) By Nouriel Roubini >

In April, I warned that today’s extremely loose monetary and fiscal policies, when combined with a number of negative supply shocks, could result in 1970s-style stagflation (high inflation alongside a recession). In fact, the risk today is even bigger than it was then.

After all, debt ratios in advanced economies and most emerging markets were much lower in the 1970s, which is why stagflation has not been associated with debt crises historically. If anything, unexpected inflation in the 1970s wiped out the real value of nominal debts at fixed rates, thus reducing many advanced economies’ public-debt burdens.

Conversely, during the 2007-08 financial crisis, high debt ratios (private and public) caused a severe debt crisis – as housing bubbles burst – but the ensuing recession led to low inflation, if not outright deflation. Owing to the credit crunch, there was a macro shock to aggregate demand, whereas the risks today are on the supply side.

Read the full [*Project Syndicate* article](https://www.project-syndicate.org/commentary/stagflation-debt-crisis-2020s-by-nouriel-roubini-2021-06).

\_\_\_
*Nouriel Roubini is a Professor of Economics and International Business and the Robert Stansky Research Faculty Fellow.*## More from Nouriel Roubini

- [Oil Shocks Are No Longer So Shocking.](https://www.stern.nyu.edu/index%2ephp/experience-stern/faculty-research/opinion/oil-shocks-are-no-longer-so-shocking)
- [Four Scenarios for the Iran War.](https://www.stern.nyu.edu/index%2ephp/experience-stern/faculty-research/opinion/four-scenarios-iran-war)
- [U.S. Escalation Is the Most Likely Scenario in Iran.](https://www.stern.nyu.edu/index%2ephp/experience-stern/faculty-research/opinion/us-escalation-most-likely-scenario-iran)
- [Kevin Warsh Is in for a Rude Awakening.](https://www.stern.nyu.edu/index%2ephp/experience-stern/faculty-research/opinion/kevin-warsh-rude-awakening)
- [The Coming Crypto Apocalypse.](https://www.stern.nyu.edu/index%2ephp/experience-stern/faculty-research/coming-crypto-apocalypse)